TWEA%TOIZNE~GENERAL 

OF'TEXAS 

AUSTIN. Trcx~s 78711 

Sept. 23, 1977 

Honorable E. J. Voorhis, 

Acting Director 

Opinion No. ~-1060 

State Board of Insurance Re: Change of optional 

1110 San Jacinto retirement program contracts 

Austin, Texas 78786 or carriers. 

Dear Mr. Voorhis: 

Your office has asked 'if.sections 51.352 (6) and 57.358 

of the Texas Education Code prevent optional retirement program (hereafter ORP) participants from using benefits accrued 

under an ORPcontract to.fund a different ORP contract offered 

by the same carrier or by a different one. ,~ 

It is the responsibility of the governing body of each 

Texas institution of higher education to administer an optional 

retirement program and to provide for the purchase of annuity 

contracts from a variety of qualified carriers. Education Code 

ss 51.353; 51*354. The purpose is to provide retirement benef.its &to teachers and administrators at state supported institutions of higher education. Education Code S 51.351; Attorney 

General Opinion H-532 (1975). 

Of the two Education Code sections,you cite, the first, 

section 51.352, reads: 

In this subchapter: 

. . . . 

(6) ~'Optional Retirement Program' .means 

the program under this Subchapter to provide fixed or'variable retirement annuities 

which meet the requirements of . . . :tcertain sections of the Internal Revenue Code 

of 19541, and the benefits of such annuities 

are to be available only upon termination of employment in the Texas public 

institutions of higher education, retirement, death or total disability of the 

participating faculty member. 

p. 4352 
Honorable E. J. Voorhis - Page 2 (H-1060) 

(Emphasis added). 

The other, section 51.358, reads: 

Participation in the Optional Retirement 

Program shall terminate and the benefits 

of such annuities will be available only 

if the participant 

(1) Dies; 

(2) Terminates his employment due to 

total disability; 

(3) Accepts retirement; 

(4) Terminates employment in the Texas 

public institutions of higher education. . . . Transfers between such 

institutions mentioned in this section 

and changes in carriers shall not 

constitute termination of employment. 

An institution of higher education 

shall accept the transfer of any 

participant's Optional Retirement 

Program. 

(Emphasis added). 

In Attorney General Opinion H-532 (1975) at 3, we said 

section 51.358 constitutes.an express limitation on the availability of benefits for ORP annuitants, and that such benefits 

"are unavailable so long as the faculty participant remains an 

employee in a public institution of higher education." Further, 

we said: 

[Al participant in the ORS [Optional 

Retirement System] has never had the 

right to surrender his annuity contract 

for cash or to receive a loan of all or 

any part of the accumulated contributions 

during the time he remained an ~employee 

of a public institution of higher education. . . . While participants' rights 

under an ORP vest in one year, theses 

rights are to receive future benefits 

upon termination of,employment by a 

public institution of higher education. 

There is no wright to those future benefits prior to termination. 

Id. at 4. - 

p. 4353 
Honorable E. J. Voorhis - page 3 (H-1060) 

ment Systc~ 

Fort Worth 19531, 

Citing them, we sa 

Ouir analysis in R-532 was strongly influenced by Woods 

v. Reillv, 218 S.W.Zd 437 (Tex. 1949), and by Teacher Retiream v. Duckworth, 260 S.W.Zd 632 (Tex. Civ. App. -- 

binion adopted, 264 S.W.Zd 98 (Tex. 1954). 

ctual retirement system 

annuities are to be regarded as "pay withheld to induce 

~ continued faithful service," and that cash surrender or loan 

provisions which make contract benefits available to participants before retirement "are inconsistent with the Purpose 

underlying retirement systems, which is to provide security 

upon retirement." H-532 (1975) at 4. 

Your office suggests that the benefits of an ORP contract 

do not *become available" to the ORP participant ieheh the contributions and earnings accumulated pursuant to one institutionallyapproved ORP ctintract are transferred directly to another 

such institutionally-approved contracti You suggest that if 

the transfer is accomplished in a manner that prevents possible 

diversion or unauthorized use of the accumulated Oti assets, 

the basic purpose and pian of the retirement system cbntinues 

to be servedt a, pay 'continues to be withheld to induce continued faithful service, and no benefits become avaiiabis to a 

participant in a way inconsistent with the provision of security 

upon retirement. 

We agreti. Section 51i358~ ocintefnplates that Ddrtibipants 

may change carriers or transfer programs from one institution 

to another. It d&%fully provides that such transactions "shall 

hOt’&hBtitUte a termination of empioyment," the event which 

gives participants access to the benefits of their annuity contracts& Attorhey deheral Opinion R-532 dealt with one aspect 

of that matter when it observed that a "participant may transfer 

programs and receive benefits from both." R-532 (1975) at 3. 

We recognized that a participant might discontinue mdking~contributions to one program and begin particieating in another 

approved program; and where its hssetsiWere fiat transferred 

from the old program to,fdnd the new one, that the participant 

could do so without forfeiting future benefits under the old 

contract; See Ins. code art. 3*72, S 31~) (i)+ - 

In Attorney General Opinion R;.532 we were.&& if the 12~ 

prohibited ORP contracts from containing provisiotis for cash 

surrenders and contract loans to a still-employed participant 

and whether this prohibition would affect the transfer of a 

participant from one institution to another or froth one ORR to 

another, Our attention was given to determining if the transaction would allow participants immediatei unfettered access to 

accrued contractual benefits. We did not address the legality 

of other arrangements which might be made in such an event.. 

p. 4354 
Honorable E. J. Voorhis - PWe 4 (H-1060) 

.<.In our opinion, neither Texas Education Code, section 

51.352 (,6),~nor section 51.358 prohibits participants from 

transferring from one approved optional. retirement program to 

another, so long as the actions taken are note subterfuges to 

obtain pre-termination access to ORBbenefits or assets, and 

do not otherwise frustrate the law. We do not think the authorized transfer of ORB assets to a different, approved ORB gives 

them such access. Cf. Internal Revenue Ruling 73-124 (change 

of carriers is neit= a surrender of annuity nor a taxable 

event). 

SUMMARY 

Neither Texas Bducation Code,~,section 

51.352 (6)., ,nor section 51.:358 prohibits 

still-employed participants from transferring fromone approlied.op&tional re:' 

tirement program to another, so,long as 

the actions taken are not subterfuges to 

~obtaiir pre-termination access~ to ORB 

benefits or assets, land-do not.otherwise 

frustrate the law. 

-Very truly yours, 

AL. HILL 

Attorney General 

~APPROVBD: 

c. ROBERT,HBATH, Chairman, 

Opinion Committee 

jst 

p. 4355 :' :. 

of Texas